TMI Blog2021 (1) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... e : Smt. Anupama Singla Sr.DR ORDER PER PAWAN SINGH, JUDICIAL MEMEBER: 1. This appeal by assessee is directed against the order of ld.Commissioner of Income Tax (Appeals)-I[CIT(A)], Surat dated 08.02.2013 for assessment year (AY) 2009-10. The assessee has raised the following grounds of appeal: 1. The learned CIT Appeals-I has erred in disallowing expenditure of premium paid on investment amortized of ₹ 79,05,467/- without considering the facts submitted by the assessee. 2. The learned CIT Appeals-I has erred in disallowing expenditure of process charges for MICR of ₹ 34,75,188/- without considering the facts submitted by the assessee. 3. The appellant craves to add, to alter, to amend or to modify all any of grounds of appeal. 2. Brief facts of the case are that the assessee is a Co-operative Bank. The assessee filed its Return of Income for the A.Y. 2009-10 on 17.09.2009 declaring total income of ₹ 24,16,31,680/-. The case was selected for scrutiny. The ld.Assessing Officer after issuing show cause notice and considering the submission/explanation of assessee, made disallowance of premium paid on investment amortized of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : (1) As per Section 6 read with Section 5(b) and (c) Banking regulation Act and as per the guideline issued by the Reserve Bank Of India, Investment activities is the normal banking activity and should be treated as banking stock in trade. The format of the balance sheet has been prescribed by the legislature and bank has to report their financial result in that format only. As per this format the Investment in Non-SLR Securities though treated as banking assets (stock in trade) has to be shown in the balance sheet as Investment. (2) The above position has also been clarified by Circular no. 665 of the CBDT dated 05-10-1993. The question whether a particular item of investment in securities constitutes stock-in-trade or a capital asset is a question of fact In fact, the banks are generally governed by the instructions of the Reserve Bank of India from time to time with regard t:o the classification of assets and also the accounting standards for investments, The Board has, therefore, decided that the Assessing Officers should determine on the facts and circumstances of each case as to whether any particular security constitutes stock-in-trade or investment taking i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laiming no depreciation (writing back any provision of depreciation in P L account (IDR) for computation of total income) and thus valuing closing stock at cost only for showing the income in its returns. In nut shell, as discussed above, the bank has claimed loss in respect of securities which it had always meant to hold as trading assets and shown as AFS as per RBI's guidelines and classifications. Just because the banks have to keep them for longer times because of the nature of their business, it would not change the nature of the asset. Further, as held by Hon'ble Mumbai High court in the case of GIT v. Bank of Baroda (2003) 262 ITR 334; the mere fact that the banks are required as per RBI's guidelines to show I these in the balance sheet as investment would not affect the nature of the asset. The banks by the very nature of the business may have to park surplus trading funds in securities and although intended to be trading assets may have to keep them for longer periods if funds are not required. The treatment of securities of AFS categories has to be seen in contradiction and contrast with securities of HTM category which are purchased and held for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities/bonds are of trading nature notwithstanding the fact that the securities were grouped under the head 'investment' owing to the prescribed format of the RBI. We find that the order of the CIT (A) dealing with the issue is consistent with the CBDT instruction as well as the facts of the case and does not require any elaboration. Accordingly, we decline to interfere with the order of the CIT(A). 11. We find that the Government securities from the market which has been classified as held to maturity (HTM) category and therefore, premium paid over and above the face value of ₹ 79,05,467/- over the remaining period of maturity and same is allowable as deduction. As per RBI guidelines dated 16th October 2000, the Investment portfolio of the banks is required to be classified under three categories viz. Held to Maturity (HTM), Held for Trading (HFT) and Available for Sale (AFS). Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortized over the period remaining to maturity. This was explained by the CBDT vide Instruction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of his submissions, the ld.AR of the assessee relied upon the decision of Ahmedabad Tribunal in Karnavati Cooperative Bank Ltd. vs. Dy.CIT [2017] 17 Taxmann.com 239 (AHD) and Hon'ble Apex Court in CIT vs. Kotak Services Limited 383 ITR 1. 11. In alternative submission, the ld.AR of the assessee submits that the recipient of MICR charges i.e. SBI has included such charges in their income and had paid tax on such receipt. Once the recipient has offered such charges to the tax, therefore, no disallowance is sustainable at the hand of payee. The ld.AR submits that the ld.AO may be directed to verify the fact. The assessee would submit the necessary evidence for his verification. 12. On the other hand, the ld. DR for the Revenue supported the order of Lower Authorities. The ld. DR further submits that the Ahmedabad Tribunal in Canara Bank case, reported vide 116 TTJ 689 held that the assessee was liable to deduct tax at source on such transactions. 13. We have considered the submission of both the parties and perused the orders of Lower Authorities carefully. Before us, the ld.AR of the assessee in his alternative submission vehemently submitted that the SBI i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
